The Reserve Bank of India has introduced a comprehensive revamp of its business correspondent model by creating three distinct delivery points to enhance customer services and expand financial inclusion. According to The Economic Times, the central bank announced there will be branches, business correspondent-banking outlets (BC-BO) and business correspondent-banking touchpoints (BC-BT). The amendments are based on recommendations from a committee consisting of officials from RBI, Department of Financial Services, Indian Banks' Association and the National Bank for Agriculture & Rural Development. RBI has sought public feedback on the draft norms by May 5. The reform aims to inject new life into financial inclusion efforts and enhance last-mile banking services across India, particularly addressing the recent decline in village-level BC outlets. As reported by HomeEconomy News, the RBI stated that business correspondents have been functioning as critical enablers of last mile access to financial services, particularly in respect of underserved, rural, and remote locations.
As reported by The Economic Times, BC-BO will be fixed-point service delivery units, operated by a BC or its sub-agent offering services for minimum four hours per day for at least five days in a week. These units will offer most services that a bank branch provides. BC-BTs will have no fixed time of service, with both BC-BO and BC-BT working exclusively for a single bank. The central bank has proposed that BCs or BC sub-agents operating as banking outlets will have fixed and variable components in their remuneration while BC-BTs will be entitled to only variable payments. RBI mandated the Indian Banks' Association (IBA) to create a structure for monthly remuneration, which would be benchmarked to an external indicator. The variable remuneration will have an element of customer satisfaction and not merely be based on the volume of transactions, moving beyond a sole reliance on transaction volumes. According to HomeEconomy News, BC-BOs will receive both fixed and variable pay, while BC-BTs will be compensated through variable payouts, with the IBA developing a benchmark-linked remuneration structure.
According to The Economic Times, RBI has mandated that banks conduct thorough due diligence on BCs prior to their engagement, covering their market standing, financial strength, governance structure, cash handling ability and ability to implement technology solutions. The central bank has also proposed simplifying the eligibility criteria for engaging BCs. There will be no separate category of business facilitators, as they undertake functions similar to that of BCs. Existing BFs will be categorised as BC-BO or BC-BT by September 30, 2026. This due diligence will encompass their market standing, financial strength, governance structures, cash handling capabilities, and their ability to implement technology solutions to ensure the integrity and effectiveness of the BC network.
A key component of the proposed changes involves bringing Business Facilitators (BFs) into the existing BC system to create a more consistent network. Historically, BCs handled transactions while BFs helped find customers, process loan applications, and support self-help groups. As reported by HomeEconomy News, the RBI wants to merge these roles to simplify how banks manage and report on their outreach efforts. This integration aims to improve financial services for remote areas and standardize bank requirements, though it raises concerns about losing specialized skills and customer support that BFs provided in assisting customers and processing applications. The draft also proposes discontinuing the business facilitator category, with existing entities required to transition to the BC framework by September 30, 2026.
As reported by The Economic Times, business correspondents have been functioning as critical enablers of last mile access to financial services, particularly in respect of underserved, rural, and remote locations. The total number of BC outlets declined nearly to 13.11 lakh in FY25, from 15.48 lakh in FY24 across the country, according to RBI's Trend and Progress of Banking in India report. The banking sector itself remains robust, with a Gross Non-Performing Asset (GNPA) ratio at a multi-decadal low of 2.1% as of September 2025. Major banks like State Bank of India (SBI) exhibit a P/E ratio of approximately 10.5, HDFC Bank around 15.0, and ICICI Bank around 15.0 as of April 2026. The Nifty Bank index has shown a modest positive return over the past year. However, significant execution risks remain in the standardized payment structure, as a flat commission rate could discourage agents from serving less profitable regions or handling small payments, potentially worsening access problems in the very areas the rules aim to serve.
While the RBI's intent to revitalize the BC model is clear, significant implementation risks loom. The shift towards variable remuneration for BC-BTs, and even the variable component for BC-BOs, could lead to income volatility for agents, potentially impacting their commitment, especially in regions with low transaction volumes. A standardized remuneration structure might not adequately capture the diverse operational costs and market dynamics across different geographical areas, risking an exodus of agents from less profitable rural and remote locations. The proposed integration of Business Facilitators (BFs) into the BC model could dilute the distinct roles and potentially create operational confusion or reduce specialized focus. The success of this revamped BC model will depend on the RBI's ability to balance standardization with flexibility, ensuring efficiency doesn't harm the goal of providing accessible, affordable, and quality financial services to everyone across India's diverse geographical landscape.
